Standard & Poor’s Ratings Services has assigned its ‘R’ financial strength rating to American Superior Insurance Co. based on the company’s announcement last week that it has agreed to be put under rehabilitation by the Division of Rehabilitation and Liquidation of the Florida Department of Financial Services.
American Superior, a small homeowners insurer covering about 60,000 Floridians, agreed to enter rehabilitation after concluding that it lacked the sufficient reserves and operational resources to handle the deluge of claims related to hurricanes Charley, Frances, Ivan, and Jeanne.
The company was hit hurt particularly hard because of the extent of storm-related damage done in the Florida panhandle area, where the company holds significant business concentration. Under rehabilitation, the company will be precluded from writing new business but will be able to renew existing business. No policies will be cancelled.
American Superior is the first insurance company to be put under state supervision as a direct result of the four hurricanes to hit Florida this hurricane season. Losses from these storms are expected to exceed $20 billion for the industry and could cause financial stress for other insurers, particularly those concentrated in Florida, as claims materialize.
Formed in 1997, American Superior writes homeowners insurance exclusively in the state of Florida. The company has only reported a profit in one (2001) of the last five years. In 2003, the company reported surplus of $5.3 million and wrote total homeowners insurance premium of $34.3 million.
An insurer rated ‘R’ is under regulatory supervision owing to its financial condition. During the pendency of the regulatory supervision, the regulators may have the power to favor one class of obligations over others or pay some obligations and not others. The rating does not apply to insurers subject only to nonfinancial actions such as market conduct violations.
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